House Bill Will Repeal SGR, Raise Doc Pay Yearly

WASHINGTON -- Legislation to end the widely disliked sustainable growth rate (SGR) formula for physician reimbursement under Medicare and replace it with yearly payment increases was introduced Wednesday.

The Medicare Physician Payment Innovation Act, sponsored by representatives Allyson Schwartz (D-Penn.) and Joe Heck, DO (R-Nev.), would permanently repeal the SGR formula and, instead, offer yearly increased payment updates for physicians for 4 years, according to a release from Schwartz's office. It would identify new payment and delivery models, including for different specialties, practice types, and geographic regions.

It also would stabilize reimbursement for providers who exhibit "quality and efficiency within a fee-for-service model," according to the release. Through scheduled updates, the act would "ensure long-term stability in the Medicare physician payment system ... that accurately reflect[s] the cost and value of providing healthcare services in coordinated care models."

John Rother, president and CEO of the National Coalition on Health Care, which represents businesses, medical societies, unions, insurers, healthcare providers, and patients, noted in the press release that "This bipartisan legislation would help deliver the real reform we need, moving us away from today's fee-for-service system to higher-quality, lower-cost care."

SGR was viewed as a way to limit growth in Medicare spending by holding down payment for physician services. Under the formula, which debuted in the 1990s, physician reimbursement rates were linked to increases in the gross domestic product. Each year, the formula would result in planned reimbursement cuts for the following year, and Congress has voted nearly every year since 2003 to override the cuts -- moves that have added to the budget deficit.

"Each year, healthcare practitioners are faced with devastating cuts that could make it nearly impossible for them to continue providing care for Medicare beneficiaries," said co-sponsor Heck in the release. "And each year Congress has avoided coming up with a serious solution to this problem."

Calls within organized medicine for a permanent repeal of the SGR have been numerous and frequent, and the proposal from Schwartz and Heck has garnered accolades from the medical community. This week, the Congressional Budget Office lowered its estimate of the cost to permanently repeal the SGR from $245 billion to $138 billion.

"Over the past decade, the repeated threat of cuts to physician payments resulting from the SGR has brought chaos to the practice environment," Charles Cutler, MD, chair-elect of the American College of Physicians board of regents, said in a statement. "It is difficult for physicians to keep their doors open, especially for our members in small or solo practices, with the constant threat of Medicare payments being cut by 25% or more."

The act also contains other proposed reforms to Medicare, including aggressively testing and evaluating new payment and delivery models and ensuring access to preventive care, care coordination, and primary care services through increased payment updates for those services.

"This legislation is an important part of the continuing discussion on the future of Medicare and the end of the SGR," said Jeremy Lazarus, MD, president of the American Medical Association (AMA). He added that he and his AMA colleagues are eager "to move past the SGR and transition to an array of Medicare delivery and payment options that give physicians the flexibility they need to help lower costs and improve the quality of care for their patients."

The CBO reported that for the 10-year budget period from 2013 to 2022, technical changes to estimates for Medicare reduced projections of overall spending on the program by $137 billion (2%), mostly because of updated data on actual spending for 2012. It was the third consecutive year that spending was lower than projections.

Since the CBO decreased its projections for Medicare spending over the 10-year window, the cost of repealing SGR decreased accordingly, said Schwartz's legislative director, Charlene MacDonald. CBO didn't detail its assumptions, she said, "but I think it's likely a combination of reforms to delivery and payment systems already under way that is saving costs in Medicare, as well as the economy."

The CBO also estimated that the Affordable Care Act would cost about $1 trillion over the next decade.

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